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Town of JohnstonGASB 45 Actuarial Valuation
Fiscal Year Ending June 30, 2014
Prepared by:
Nyhart Actuary & Employee Benefits
8415 Allison Pointe Blvd., Suite 300
Indianapolis, IN 46250
Ph: (317) 845-3500
www.nyhart.com
Table of Contents Page
Certification 1
Actuary’s Notes 2
Executive Summary 3
GASB Disclosures
Development of Annual Required Contribution (ARC) 6
Development of Annual OPEB Cost and Net OPEB Obligation 7
Schedule of Funding Progress 8
Schedule of Employer Contributions 8
Historical Annual OPEB Cost 8
Reconciliation of Actuarial Accrued Liability (AAL) 9
Employer Contribution Cash Flow Projections 10
Substantive Plan Provisions 11
Actuarial Methods and Assumptions 15
Summary of Plan Participants 21
Appendix 23
Required Supplementary Information by Group 24
Comparison of Participant Demographic Information 26
Glossary 27
Decrements Exhibit 28
Retirement Rates Exhibit 29
Illustrations of GASB Calculations 30
Definitions 32
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July 25, 2014
Joe Chiodo
Town of Johnston
1385 Hartford Avenue
Johnston, RI 02919
This report summarizes the GASB actuarial valuation for the Town of Johnston’s 2013/14 fiscal year. To the best of our knowledge, the report presents a fair
position of the funded status of the plan in accordance with GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Post-Employment
Benefits Other Than Pensions). The valuation is also based upon our understanding of the plan provisions as summarized within the report.
The information presented herein is based on the information furnished to us by the Plan Sponsor that has been reconciled and reviewed for reasonableness.
We are not aware of any material inadequacy in employee census provided by the Plan Sponsor. We have not audited the information at the source, and
therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based.
The actuarial assumptions were selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the actuarial assumptions are individually
reasonable and in combination represent our estimate of anticipated experience of the Plan. All computations have been made in accordance with generally
accepted actuarial principles and practice.
To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect
the results contained herein.
Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report.
Should you have any questions please do not hesitate to contact us.
Randy Gomez, FSA, MAAA Evi Laksana, ASA, MAAA
Consulting Actuary Valuation Actuary
Town of Johnston GASB 45 Valuation
Actuary’s Notes For Fiscal Year Ending June 30, 2014
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Changes since the last full valuation, which was for the fiscal year ending June 30, 2012:
1. Retiree health eligibility requirements for School Certified employees have changed due to the enactment of Article 7 in 2009 (for Rhode Island
Employees Retirement System (RI ERS) members only) and the RIRSA in 2011. For many employees, this change has delayed the earliest date an
employee could retire. Refer to Substantive Plan Provisions section for the complete retiree health benefits eligibility requirements. This change reduced
the Town’s liabilities slightly.
2. Retirement rate for School Certified employees have been updated to be consistent with the most recent assumption used in the RI ERS actuarial
valuation as of June 30, 2012. This change created an increase in liabilities.
Town of Johnston GASB 45 Valuation
Executive Summary For Fiscal Year Ending June 30, 2014
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Summary of Results
Presented below is the summary of GASB 45 results for the fiscal year ending June 30, 2014 compared to the prior fiscal years as shown in the Town’s Notes to
Financial Statement.
As of July 1, 2012 As of July 1, 2013
Actuarial Accrued Liability $ 186,959,602 $ 199,586,608
Actuarial Value of Assets $ 0 $ 0
Unfunded Actuarial Accrued Liability $ 186,959,602 $ 199,586,608
Funded Ratio 0.0% 0.0%
FY 2012/13 FY 2013/14
Annual Required Contribution $ 14,727,631 $ 15,214,424
Annual OPEB Cost $ 14,479,364 $ 14,824,478
Annual Employer Contribution $ 5,189,692 $ 4,764,265
As of June 30, 2013 As of June 30, 2014
Net OPEB Obligation $ 60,929,100 $ 70,989,313
As of July 1, 2013
Total Active Participants 621
Total Retiree Participants 583
The active participants’ number above may include active employees who currently have no health care coverage. Refer to Summary of Participants section for
an accurate breakdown of active employees with and without coverage.
Town of Johnston GASB 45 Valuation
Executive Summary For Fiscal Year Ending June 30, 2014
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Below is a breakdown of total GASB 45 liabilities allocated to past, current, and future service as of July 1, 2013 compared to the prior year.
As of July 1, 2012 As of July 1, 2013
Present Value of Future Benefits $ 282,832,594 $ 286,983,914
Active Employees 166,427,797 162,524,635
Retired Employees 116,404,797 124,459,279
Actuarial Accrued Liability $ 186,959,602 $ 199,586,608
Active Employees 70,554,805 75,127,329
Retired Employees 116,404,797 124,459,279
Normal Cost $ 7,038,841 $ 6,716,463
Future Normal Cost $ 88,834,151 $ 80,680,843
Present Value of Future Benefits is the amount needed
as of July 1, 2012 and 2013 to fully fund the Town’s retiree
health care subsidies for existing and future retirees and
their dependents assuming all actuarial assumptions are
met.
Actuarial Accrued Liability is the portion of PVFB
considered to be accrued or earned as of July 1, 2012 and
2013. This amount is a required disclosure in the Required
Supplementary Information section.
Normal Cost is the portion of the total liability amount that
is attributed and accrued for current year’s active employee
service by the actuarial cost method.
Future Normal Cost is the portion of the total liability
amount that is attributed to the future employee service by
the current year’s valuation by the actuarial cost method.
Town of Johnston GASB 45 Valuation
Executive Summary For Fiscal Year Ending June 30, 2014
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Below is a breakdown of total GASB 45 Actuarial Accrued Liability (AAL) allocated to pre and post Medicare eligibility. The liability shown below includes explicit
(if any) and implicit subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan Sponsor’s GASB subsidies.
Actuarial Accrued Liability (AAL) As of July 1, 2012 As of July 1, 2013
Active Pre-Medicare $ 25,533,774 $ 28,472,446
Active Post-Medicare 45,021,031 46,654,883
Total Active AAL $ 70,554,805 $ 75,127,329
Retirees Pre-Medicare $ 32,565,437 $ 36,952,015
Retirees Post-Medicare 83,839,360 87,507,264
Total Retirees AAL $ 116,404,797 $ 124,459,279
Total AAL $ 186,959,602 $ 199,586,608
$58
$129
$65
$134
$0
$50
$100
$150
Pre-Medicare Cost Post-Medicare Cost
Mil
lio
ns
Change in AAL
July 1, 2012 July 1, 2013
Town of Johnston GASB 45 Valuation
GASB Disclosures For Fiscal Year Ending June 30, 2014
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Development of Annual Required Contribution (ARC)
Required Supplementary Information FY 2012/13 FY 2013/14
Actuarial Accrued Liability as of beginning of year $ 186,959,602 $ 199,586,608
Actuarial Value of Assets as of beginning of year 0 0
Unfunded Actuarial Accrued Liability (UAAL) $ 186,959,602 $ 199,586,608
Covered payroll N/A N/A
UAAL as a % of covered payroll N/A N/A
Annual Required Contribution FY 2012/13 FY 2013/14
Normal cost as of beginning of year $ 7,038,841 $ 6,716,463
Amortization of the UAAL 7,190,754 7,983,464
Total normal cost and amortization payment $ 14,229,595 $ 14,699,927
Interest to end of year 498,036 514,497
Total Annual Required Contribution (ARC) $ 14,727,631 $ 15,214,424
Annual Required Contribution (ARC) is the annual
expense recorded in the income statement under GASB 45
accrual accounting. It replaces the cash basis method of
accounting recognition with an accrual method. The GASB 45
ARC is higher than the pay-as-you-go cost because it includes
recognition of employer costs expected to be paid in future
accounting periods.
$5.2 $4.8
$14.7 $15.2
$0
$4
$8
$12
$16
2012/13 2013/14
Mil
lio
ns
Cash vs Accrual Accounting
Pay-go cost ARC
Town of Johnston GASB 45 Valuation
GASB Disclosures For Fiscal Year Ending June 30, 2014
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Development of Annual OPEB Cost and Net OPEB Obligation
Net OPEB Obligation FY 2012/13 FY 2013/14
ARC as of end of year $ 14,727,631 $ 15,214,424
Interest on Net OPEB Obligation (NOO) to end of year 1,807,380 2,132,519
NOO amortization adjustment to the ARC (2,055,647) (2,522,465)
Annual OPEB cost $ 14,479,364 $ 14,824,478
Annual employer contribution for pay-go cost (5,189,692) (4,764,265)
Annual employer contribution for pre-funding 0 0
Change in NOO $ 9,289,672 $ 10,060,213
NOO as of beginning of year 51,639,428 60,929,100
NOO as of end of year $ 60,929,100 $ 70,989,313
Pay-as-you-go Cost is the expected total employer cash cost
for the coming period based on all explicit and implicit
subsidies. It is also the amount recognized as expense on the
Income Statement under pay-as-you-go accounting.
Net OPEB Obligation is the cumulative difference between
the annual OPEB cost and employer contributions. This
obligation will be created if cash contributions are less than
the current year expense under GASB 45 accrual rules.
The net obligation is recorded as a liability on the employer’s
balance sheet which will reduce the net fund balance.
The value of implicit subsidies is considered as part of cash
contributions for the current period. Other cash expenditures
that meet certain conditions are also considered as
contributions for GASB 45 purposes.
Town of Johnston GASB 45 Valuation
GASB Disclosures For Fiscal Year Ending June 30, 2014
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Summary of GASB 45 Financial Results
Presented below is the summary of GASB 45 results for the fiscal year ending June 30, 2014 and prior fiscal years as shown in the Town’s Notes to Financial
Statements.
Schedule of Funding Progress
As of Actuarial Accrued
Liability (AAL)
Actuarial Value of Assets
(AVA)
Unfunded Actuarial
Accrued Liability (UAAL)
Funded
Ratio Covered Payroll
UAAL as % of
Covered Payroll
A B C = A - B D = B / A E F = C / E
July 1, 2013 $ 199,586,608 $ - $ 199,586,608 0.0% N/A N/A
July 1, 2012 $ 186,959,602 $ - $ 186,959,602 0.0% N/A N/A
July 1, 2011 $ 229,015,277 $ - $ 229,015,277 0.0% N/A N/A
Schedule of Employer Contributions
FYE Employer
Contributions
Annual Required
Contribution (ARC) % of ARC Contributed
A B C = A / B
June 30, 2014 $ 4,764,265 $ 15,214,424 31.3%
June 30, 2013 $ 5,189,692 $ 14,727,631 35.2%
June 30, 2012 $ 5,284,569 $ 17,249,186 30.6%
Historical Annual OPEB Cost
As of Annual OPEB Cost % of Annual OPEB Cost
Contributed Net OPEB Obligation
June 30, 2014 $ 14,824,478 32.1% $ 70,989,313
June 30, 2013 $ 14,479,364 35.8% $ 60,929,100
June 30, 2012 $ 17,194,189 30.7% $ 51,639,428
Town of Johnston GASB 45 Valuation
Reconciliation of Actuarial Accrued Liability For Fiscal Year Ending June 30, 2014
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The Actuarial Accrued Liability (AAL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is
generally expected to have a net increase each year. Below is a list of the most common events affecting the AAL and whether they increase or decrease the
liability.
Expected Events
• Increases in AAL due to additional benefit accruals as employees continue to earn service each year
• Increases in AAL due to interest as the employees and retirees age
• Decreases in AAL due to benefit payments
Unexpected Events
• Increases in AAL when actual premium rates increase more than expected. A liability decrease occurs when premium rates increase less than expected.
• Increases in AAL when more new retirements occur than expected or fewer terminations occur than anticipated. Liability decreases occur when the
opposite outcomes happen.
• Increases or decreases in AAL depending on whether benefit provisions are improved or reduced.
2012/13 2013/141
Actuarial Accrued Liability as of beginning of year $ 186,959,602 $ 199,586,608
Normal cost as of beginning of year 7,038,841 6,716,463
Expected benefit payments during the year (4,451,602) (4,773,177)
Interest adjustment to end of year 6,712,712 7,137,795
Expected Actuarial Accrued Liability as of end of year $ 196,259,553 $ 208,667,689
Actuarial (gain) / loss due to experience 2,436,879 TBD
Actuarial (gain) / loss due to provisions / assumptions changes 890,176 TBD
Actual Actuarial Accrued Liability as of end of year $ 199,586,608 $ TBD
1 Actuarial Accrued Liability (AAL) as of beginning of year was actuarially rolled-back from end of year AAL on a “no gain/loss” basis.
Reconciliation of AAL shows what the actuary expects the
actuarial accrued liability to be at the beginning of the
following fiscal year based on current assumptions and plan
provisions. The expected end of year AAL will change as actual
plan experience varies from assumptions. Generally, the AAL is
expected to have a net increase each year.
Town of Johnston GASB 45 Valuation
Employer Contribution Cash Flow Projections For Fiscal Year Ending June 30, 2014
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The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown
separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies.
FYE Current Retirees Future Retirees2 Total
2014 $ 4,653,032 $ 120,145 $ 4,773,177
2015 $ 4,809,796 $ 261,194 $ 5,070,990
2016 $ 4,983,736 $ 457,247 $ 5,440,983
2017 $ 5,125,482 $ 669,807 $ 5,795,289
2018 $ 5,306,199 $ 971,506 $ 6,277,705
2019 $ 5,522,669 $ 1,302,010 $ 6,824,679
2020 $ 5,650,155 $ 1,643,104 $ 7,293,259
2021 $ 5,847,091 $ 1,999,226 $ 7,846,317
2022 $ 6,005,426 $ 2,331,345 $ 8,336,771
2023 $ 6,069,346 $ 2,657,652 $ 8,726,998
FYE Estimated
Claims Costs
Retiree
Contributions
Net Employer-
Paid Costs
2014 $ 4,788,462 $ 15,285 $ 4,773,177
2015 $ 5,098,332 $ 27,342 $ 5,070,990
2016 $ 5,473,848 $ 32,865 $ 5,440,983
2017 $ 5,837,758 $ 42,469 $ 5,795,289
2018 $ 6,332,064 $ 54,359 $ 6,277,705
2019 $ 6,886,743 $ 62,064 $ 6,824,679
2020 $ 7,355,050 $ 61,791 $ 7,293,259
2021 $ 7,932,500 $ 86,183 $ 7,846,317
2022 $ 8,441,770 $ 104,999 $ 8,336,771
2023 $ 8,865,079 $ 138,081 $ 8,726,998
2 Projections for future retirees do not take into account future new hires.
$0
$3
$6
$9
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Mil
lio
ns
Projected Employer Pay-go Cost
Current Retirees Future Retirees
$0
$3
$6
$9
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Mil
lio
ns
Projected Employer Pay-go Cost
Retiree Contributions Net Employer Paid Costs
Town of Johnston GASB 45 Valuation
Substantive Plan Provisions For Fiscal Year Ending June 30, 2014
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Eligibility Firefighters are eligible for lifetime retiree health benefits upon attainment of 20 years of service.
Police officers are eligible for lifetime retiree health benefits upon attainment of 18 years of service. Officers
who retire after 18 years of service (early retirement) will receive health coverage benefits that were in
existence on July 1, 2012. Those who retire after 20 years of service will receive health coverage benefits in
existence on July 1, 2010.
Town general employees are eligible for lifetime retiree health benefits upon attainment of age 58 with 10 years
of service or 26 years of service with no age requirement. For Laborers’ Local 808, only employees hired prior to
April 19, 2012 are eligible for retiree health benefits.
School Certified employees are eligible for retiree health benefits upon meeting Rhode Island Employees
Retirement System eligibility requirements as described in the next section. Retirees electing spousal coverage
are required to pay the full incremental spouse cost. No spousal coverage is available once the retiree reaches
Medicare eligibility.
School Non-Certified employees are eligible for retiree health benefits according to the requirements below:
• Hired prior to September 1, 1999: age 58 with 15 years of service or 25 years of service
• Hired on/after September 1, 1999: Age 60 with 20 years of service or age 55 with 25 years of service
There is no spousal coverage available at retirement (pre or post Medicare).
Town of Johnston GASB 45 Valuation
Substantive Plan Provisions For Fiscal Year Ending June 30, 2014
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RI ERS Eligibility Requirements RI ERS eligibility requirements is the earlier of each employee’s (a) Article 7 or (b) RIRSA eligibility dates which
vary by Schedules summarized below:
Schedules Vested with 10 years of contributing
service credit as of 7/1/2005
Eligible to retire as of
9/30/2009
A Y Y*
B N Y**
AB Y N
B1 N N
B2 Employees that became a member of RI ERS after 9/30/2009
* Schedule A members were eligible to retire as of 9/30/2009 if they had (i) 28 years of service as of 9/30/2009
or (ii) had 10 years of contributing service and were age 60 as of 9/30/2009.
** Schedule B members were eligible to retire as of 9/30/2009 if they had 10 years of contributing service and
were age 65 as of 9/30/2009.
Article 7 Eligibility Date
There are no changes to Schedule A and Schedule B members retirement eligibility dates. These employees may
retire at any time once they met the prior RI ERS eligibility rules. The prior RI ERS eligibility rules are:
• Schedule A – earlier of (i) 28 years of service or (ii) age 60 with 10 years of contributing service.
• Schedule B – earlier of (i) age 65 with 10 years of contributing service or (ii) age 59 with 29 years of
contributing service.
Minimum retirement age under Article 7 for Schedule AB and B1 members is 62 with “proportional downward
adjustment” toward an earlier retirement age based on years of service as of 9/30/2009 (referred to as “frozen
service credit”).
Schedule B2 members minimum retirement age under Article 7 is age 62 without “proportional downward
adjustment” toward an earlier retirement age.
Town of Johnston GASB 45 Valuation
Substantive Plan Provisions For Fiscal Year Ending June 30, 2014
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RI ERS Eligibility Requirements RIRSA Eligibility Date
(Continued) Employees with less than five years of contributing service credit on 6/30/2012 may retire at the Social Security
normal retirement age (not higher than 67).
For employees with at least five years of contributing service credit on 6/30/2012, minimum retirement age is
62 with “proportional downward adjustment” toward an earlier retirement date based on years of service prior
to 7/1/2012, but not earlier than 59.
Employees with at least 10 years of contributing service credit on 6/30/2012 may retire at their Article 7
eligibility date if they continue to work and contribute until that date. If they are within five years of reaching
RIRSA retirement eligibility date and have at least 20 years of service, they may retire at any time.
Disability Benefits Firefighters and police officers are eligible for disability retiree health benefits with no age or service
requirement.
All other employees are eligible for disability retiree health benefits upon attainment of 20 years of service (no
age requirements).
Spouse Benefit Upon death of retiree, coverage continues to surviving spouses. Town’s subsidy will continue to spouses for
those who are receiving subsidized health benefits.
Retiree Cost Sharing Retiree medical benefits are non-contributory for all retirees and their spouses. Only School Certified employees
receive free dental benefits for employee-only coverage at retirement. This dental coverage will terminate at
Medicare eligibility.
Explicit Subsidy The Town and School pay the full cost of coverage for pre and post-Medicare retiree health benefits.
Town of Johnston GASB 45 Valuation
Substantive Plan Provisions For Fiscal Year Ending June 30, 2014
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Part B Subsidy Town retirees receive Medicare Part B premium subsidy upon Medicare eligibility for themselves and their
spouses. The monthly Part B premium effective on January 1, 2014 is $104.90. The Town also pays for the
Medicare Part B premium penalty for a closed group of existing retirees and spouses who were not enrolled in
Medicare Part B when first eligible. The Town will not pay for the Part B premium penalty for future retirees.
Medical Benefit Same benefit options are available to retirees as active employees. All pre Medicare health plans are self-
insured. Post-Medicare Blue Medicare Rx plan is fully-insured and community-rated. Below are the monthly
Healthmate premiums effective on July 1, 2013 for pre-Medicare current and future retirees:
Subgroup Subgroup Name Plan Single Family
Active Employees
0001 Town of Johnston Employees HM 259938 $ 568.08 $ 1,475.97
0003 Town of Johnston Fire HM 260050 $ 581.70 $ 1,511.34
0007 Town of Johnston Police HM 260007 $ 568.08 $ 1,475.97
0002 Johnston School Non Certified HM 260041 $ 635.70 $ 1,638.75
0006 Johnston School Department HM 259998 $ 600.58 $ 1,549.53
Retirees
0005 Town of Johnston Retirees HM 260062 $ 568.08 $ 1,475.97
0009 Town of Johnston Retirees (2) HM 260083 $ 568.08 $ 1,475.97
0004 Town of Johnston Firefighters Retirees (2) HM 260085 $ 581.70 $ 1,511.34
0006 Town of Johnston Firefighters Retirees HM 260064 $ 574.59 $ 1,492.88
0008 Town of Johnston Police Retirees HM 260141 $ 568.08 $ 1,475.97
0001 Johnston School Retirees HM 260000 $ 611.89 $ 1,575.44
0008 Johnston School Retirees II HM 260015 $ 600.58 $ 1,549.53
0004 Johnston School Non Cert – Retirees HM 260009 $ 644.64 $ 1,661.81
0005 Johnston School Non Cert – Retirees 2010 HM 260030 $ 635.70 $ 1,638.75
Upon Medicare eligibility, the Town and School provide Blue Medicare Rx plan with monthly premium of $179.
Plan 65 monthly premiums are $182.53 for the Town (with SNF) and $155.23 for the School (without SNF).
Dental Benefit Monthly dental working rate for School Certified employee is $28.15 effective on July 1, 2013.
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
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The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and Town
experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated.
There have been changes to the actuarial methods and assumptions since the last GASB valuation, which was for the fiscal year ending June 30, 2012. Refer to
Actuary’s Notes on page 2 for complete information on these changes. For the current year GASB valuation, we have updated the per capita costs. We expect to
update health care trend rates and per capita costs again for the next full GASB valuation, which will be for the fiscal year ending June 30, 2016.
Measurement Date July 1, 2013
Discount Rate 3.5% unfunded
Payroll Growth N/A
Cost Method Projected Unit Credit
Amortization Payments increasing at 3.5% and amortization period is a closed 25 years.
Census Data Census data was provided by the Town and it was provided in March 2014. We have reviewed it for
reasonableness and no material modifications were made to the census data.
Mortality Healthy retiree: RP-2000 Healthy Mortality Table fully generational projected using Scale AA
Disabled retiree: RP-2000 Disabled Mortality Table fully generational projected using Scale AA
Disability Sample annual disability rates are as shown below.
Town School Teachers School
General Age Police Fire General Male Female
20 0.17% 0.34% 0.04% 0.02% 0.01% 0.04%
25 0.17% 0.34% 0.05% 0.02% 0.02% 0.05%
30 0.22% 0.44% 0.06% 0.03% 0.02% 0.06%
35 0.29% 0.58% 0.09% 0.04% 0.03% 0.09%
40 0.44% 0.88% 0.13% 0.06% 0.05% 0.13%
45 0.72% 1.44% 0.22% 0.09% 0.08% 0.22%
50 1.21% 2.42% 0.37% 0.15% 0.14% 0.37%
55 1.21% 2.42% 0.61% 0.25% 0.23% 0.61%
60 1.21% 2.42% 0.85% 0.35% 0.31% 0.85%
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
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Withdrawal Rate Assumption used to project terminations (voluntary and involuntary) prior to meeting minimum retirement
eligibility for retiree health coverage. Annual rates are as shown below.
No terminations are assumed for Police and Firefighters hired before 1/1/1999.
Fire hired
after 1998
Teachers All others
YOS Male Female Male Female
0 10.00% 17.00% 13.00% 17.50% 18.00%
1 5.28% 9.00% 7.59% 9.59% 10.69%
2 4.81% 5.62% 6.56% 8.25% 9.06%
3 4.36% 4.55% 5.66% 7.13% 7.69%
4 3.94% 3.64% 4.86% 6.18% 6.53%
5 3.54% 2.89% 4.18% 5.41% 5.58%
6 3.16% 2.29% 3.59% 4.80% 4.81%
7 2.81% 1.81% 3.09% 4.31% 4.20%
8 2.49% 1.45% 2.67% 3.95% 3.74%
9 2.19% 1.20% 2.33% 3.68% 3.41%
10 1.91% 1.04% 2.05% 3.50% 3.18%
11 1.66% 0.95% 1.83% 3.38% 3.04%
12 1.43% 0.94% 1.65% 3.30% 2.97%
13 1.23% 0.94% 1.52% 3.26% 2.95%
14 1.05% 0.94% 1.42% 3.23% 2.95%
15 0.90% 0.94% 1.34% 3.19% 2.97%
16 0.77% 0.94% 1.28% 3.12% 2.97%
17 0.67% 0.94% 1.22% 3.02% 2.95%
18 0.59% 0.94% 1.16% 2.85% 2.87%
19 0.00% 0.94% 1.09% 2.61% 2.73%
20 0.00% 0.94% 1.01% 2.27% 2.50%
21 0.00% 0.94% 0.90% 1.82% 2.17%
22 0.00% 0.94% 0.75% 1.24% 1.70%
23 0.00% 0.94% 0.56% 0.52% 1.10%
24 0.00% 0.94% 0.33% 0.52% 0.32%
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
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Retirement Rate For Police and Firefighters
Firefighters
YOS Police Hired
before 1999
Hired after
1998*
20 5% 20% 15%
21 10% 20% 10%
22 – 23 20% 50% 5%
24 20% 50% 10%
25 20% 50% 12%
26 50% 100% 12%
27 100% 100% 14%
28 100% 100% 16%
29 100% 100% 18%
30+ 100% 100% 35%
* All employees are assumed to retire no later than age 65.
For Town’s General and School Non-Certified Employees
For members who reach 30 years of service prior to age 58, service-based rates are used. For all other members,
age-based rates are used.
Service-based rates
(00/30)
Age-based rates
(58/10)
YOS Male Female Age Male Female
30 30% 30% 58 12% 12%
31 30% 25% 59 – 61 10% 10%
32 – 34 25% 10% 62 30% 20%
36 25% 20% 63 – 64 20% 15%
37 25% 25% 65 20% 20%
38 35% 25% 66 – 68 25% 25%
39 50% 25% 69 30% 25%
40+ 100% 100% 70 – 74 30% 20%
75+ 100% 100%
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
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Retirement Rates (continued) For School Certified Employees
For members who reach 28 years of service before age 60, service-based rates are used. For members who
reach age 60 before reaching 28 years of service, age-based rates are used instead.
Because of the enactment of Article 7 in 2009 and the RIRSA in 2011, the retirement assumption was modified
for members whose retirement ages were delayed. Members who would have been assumed to retire under the
rules in effect before the enactment of the provision changes are assumed to retire when first eligible for an
unreduced benefit. This demand is recognized by adding a 10% probability for every year the member has been
deferred.
YOS Male Female Age Male Female
28 25% 20% 60 20% 20%
29 15% 15% 61 15% 15%
30 – 31 20% 20% 62 30% 25%
32 – 33 30% 30% 63 25% 20%
34 40% 35% 64 10% 20%
35 55% 50% 65+ 100% 100%
36 – 39 40% 40%
40+ 100% 100%
Health Care Trend Rates FYE Medical Part B Dental
2014 9.00% 3.25% 5.00%
2015 8.50% 3.50% 5.00%
2016 8.00% 3.75% 5.00%
2017 7.50% 4.00% 5.00%
2018 7.00% 4.25% 5.00%
2019 6.50% 4.50% 5.00%
2020 6.00% 4.50% 5.00%
2021 5.50% 4.50% 5.00%
2022+ 5.00% 4.50% 5.00%
The initial trend rate was based on a combination of
employer history, national trend surveys, and
professional judgment.
The ultimate trend rate was selected based on
historical medical CPI information.
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
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Per Capita Costs Annual per capita costs were calculated based on the weighted average premium rates as of July 1, 2013
actuarially increased using aging factors and current enrollment. Sample annual per capita costs at select ages
are as shown below:
Town School
Age Male Female Male Female
<55 $ 6,900 $ 7,800 $ 7,300 $ 8,300
55 – 59 $ 8,900 $ 8,700 $ 9,600 $ 9,300
60 – 64 $ 11,400 $ 10,300 $ 12,200 $ 11,000
65+ $ 4,338 $ 4,338 $ 4,011 $ 4,011
Annual administrative fees are included in the above per capita costs. The costs are assumed to increase with
health care trend rates.
In addition to the above per capita costs, for the Town’s Medicare retirees there is the additional cost for
Medicare Part B premium subsidy in the amount of $1,259 annually for future retirees. For current retirees,
there are additional Part B premium subsidy penalties that vary by retiree. The Part B costs and penalties are
assumed to increase with Part B trend rates.
Annual dental per capita cost for School Certified retiree is $338 and it is assumed to increase with dental trend
rates.
Employer Funding Policy Pay-as-you-go cash basis
Health Care Coverage Election Rate 100% of active employees with current coverage are assumed to continue coverage at retirement.
0% of active employees without current coverage are assumed to elect coverage at retirement.
100% of retirees with current coverage are assumed to continue coverage.
0% of retirees without current coverage are assumed to elect coverage in the future.
Spousal Coverage 60% of male and 50% of female employees are assumed to be married at retirement. Husbands are assumed to
be three years older than wives.
Spousal coverage for current retirees is based on actual data.
The per capita costs represent the cost of coverage
for a retiree-only population.
Actuarial standards require the recognition of higher
inherent costs for a retired population versus an
active population.
Town of Johnston GASB 45 Valuation
Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2014
20 | P a g e
Explicit Subsidy The difference between (a) the premium rates and (b) the retiree contribution. Below is an example of the
monthly explicit subsidies for a Town retiree enrolled in Subgroup 0005.
Premium
Rate
Retiree
Contribution
Explicit
Subsidy
A B C = A – B
Retiree $ 568.08 $ 0.00 $ 568.08
Spouse $ 907.89 $ 0.00 $ 907.89
Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rates. Below is an example of the monthly
implicit subsidies for a male Town retiree age 60 enrolled in Subgroup 0005.
Per Capita
Cost
Premium
Rate*
Implicit
Subsidy
A B C = A – B
Retiree $ 950.00 $ 568.08 $ 381.92
Spouse $ 858.33 $ 858.33 $ 0.00
* The spouse incremental premium rate is limited to the per capita cost.
GASB Subsidy Breakdown Below is a breakdown of the GASB 45 monthly total cost
for a male Town retiree age 60 and his spouse enrolled in
Subgroup 0005.
Retiree Spouse
Retiree contribution $ 0.00 $ 0.00
Explicit subsidy $ 568.08 $ 907.89
Implicit subsidy $ 381.92 $ 0.00
Total monthly cost $ 950.00 $ 907.89
All employers that utilize premium rates based on
blended active/retiree claims experience will have an
implicit subsidy. There is an exception for plans using
a true community-rated premium rate.
$0
$200
$400
$600
$800
$1,000
Retiree Spouse
$568
$908
$382
GASB Subsidy Breakdown
Retiree contribution Explicit subsidyImplicit subsidy
Town of Johnston GASB 45 Valuation
Summary of Plan Participants For Fiscal Year Ending June 30, 2014
21 | P a g e
Actives with coverage Single Non-Single Total Avg. Age Avg. Svc Salary
General employees (0001) N/A N/A 93 47.9 10.9 N/A
Firefighters (0003) N/A N/A 75 40.2 11.0 N/A
Police (0007) N/A N/A 72 38.0 8.5 N/A
School Non-Certified (0002) N/A N/A 108 54.1 13.0 N/A
School Certified (0006) N/A N/A 273 46.0 13.7 N/A
Total actives with coverage N/A N/A 621 46.1 12.2 N/A
No information was provided on active employees without coverage.
Retirees with coverage Single Non-Single Total Avg. Age
General (0002) N/A N/A 3 77.5
General (0005) N/A N/A 8 58.5
General (0009) N/A N/A 22 64.4
General with SNF (0010) N/A N/A 83 75.3
Firefighters (0004) N/A N/A 34 50.4
Firefighters (0006) N/A N/A 30 58.8
Firefighters with SNF (0012) N/A N/A 26 70.3
Police (0008) N/A N/A 61 54.4
Police with SNF (0011) N/A N/A 42 71.1
School Non-Certified (0004) N/A N/A 8 63.0
School Non-Certified (0005) N/A N/A 9 60.8
School Non-Certified Plan 65 (0007) N/A N/A 20 77.0
School Certified (0001) N/A N/A 46 62.6
School Certified (0008) N/A N/A 17 61.4
School Certified Plan 65 (0003) N/A N/A 174 72.5
Total retirees with coverage N/A N/A 583 67.1
Town of Johnston GASB 45 Valuation
Summary of Plan Participants For Fiscal Year Ending June 30, 2014
22 | P a g e
Active Age-Service Distribution
Years of Service
Age < 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & up Total
Under 25 3 4 7
25 to 29 12 22 5 39
30 to 34 6 16 42 5 69
35 to 39 2 13 13 33 7 1 69
40 to 44 3 8 16 35 36 6 104
45 to 49 4 13 14 25 30 16 1 103
50 to 54 1 5 9 32 18 9 5 1 80
55 to 59 2 3 13 25 23 8 8 2 1 85
60 to 64 2 8 14 11 16 1 52
65 to 69 1 1 3 6 1 12
70 & up 1 1
Total 33 87 121 172 131 57 15 4 1 0 621
Town of Johnston GASB 45 Valuation
Appendix For Fiscal Year Ending June 30, 2014
23 | P a g e
APPENDIX
Town of Johnston GASB 45 Valuation
Appendix For Fiscal Year Ending June 30, 2014
24 | P a g e
Appendix A – Required Supplementary Information by Group
Schedule of Funding Progress for Fiscal Year Ending June 30, 2014
Groups
Actuarial Accrued
Liability (AAL)
As of July 1, 2013
Actuarial Value of
Assets (AVA)
As of July 1, 2013
Unfunded Actuarial
Accrued Liability (UAAL)
As of July 1, 2013
AVA as a % of
AAL
Covered Payroll
For 2013/14
UAAL as a % of
Covered Payroll
A B C = B – A D = A / B E F = C / E
Fire $ 60,170,429 $ - $ 60,170,429 0.0% N/A N/A
Police $ 57,587,658 $ - $ 57,587,658 0.0% N/A N/A
Sewer $ 1,116,250 $ $ 1,116,250 0.0% N/A N/A
Water $ 181,707 $ - $ 181,707 0.0% N/A N/A
Town General $ 29,000,480 $ - $ 29,000,480 0.0% N/A N/A
School $ 51,530,084 $ - $ 51,530,084 0.0% N/A N/A
Total $ 199,586,608 $ - $ 199,586,608 0.0% N/A N/A
Schedule of Employer Contributions for Fiscal Year 2013/14
Annual OPEB Costs
(AOC)
For 2013/14
Actual Contributions
For 2013/14
% of AOC Contributed
For 2013/14
A B C = A / B
Fire $ 4,343,508 $ 1,084,167 25.0%
Police $ 4,434,178 $ 1,220,751 27.5%
Sewer $ 138,268 $ 0 0.0%
Water $ 13,464 $ 0 0.0%
Town General $ 2,308,873 $ 852,968 36.9%
School $ 3,586,187 $ 1,606,379 44.8%
Total $ 14,824,478 $ 4,764,265 32.1%
Town of Johnston GASB 45 Valuation
Appendix For Fiscal Year Ending June 30, 2014
25 | P a g e
Appendix A – Continued
Net OPEB Obligation (NOO) as of June 30, 2014
Groups
Annual Required
Contribution (ARC)
For 2013/14
Interest on
Existing NOO
For 2013/14
ARC Adjustment
For 2013/14
AOC
For 2013/14
Actual
Contributions
For 2013/14
Net Increase in
NOO
For 2013/14
NOO
As of June 30, 2014
A B C D = A + B + C E F = D – E G
Fire $ 4,463,431 $ 655,829 $ (775,752) $ 4,343,508 $ 1,084,167 $ 3,259,341 $ 21,997,305
Police $ 4,550,729 $ 637,388 $ (753,939) $ 4,434,178 $ 1,220,751 $ 3,213,427 $ 21,424,508
Sewer $ 138,665 $ 2,167 $ (2,564) $ 138,268 $ 0 $ 138,268 $ 200,196
Water $ 13,528 $ 353 $ (417) $ 13,464 $ 0 $ 13,464 $ 23,545
Town General $ 2,358,646 $ 272,198 $ (321,971) $ 2,308,873 $ 852,968 $ 1,455,905 $ 9,232,977
School $ 3,689,425 $ 564,584 $ (667,822) $ 3,586,187 $ 1,606,379 $ 1,979,808 $ 18,110,782
Total $ 15,214,424 $ 2,132,519 $ (2,522,465) $ 14,824,478 $ 4,764,265 $ 10,060,213 $ 70,989,313
Town of Johnston GASB 45 Valuation
Appendix For Fiscal Year Ending June 30, 2014
26 | P a g e
Comparison of Participant Demographic Information
The active participants’ number below may include active employees who currently have no health care coverage. Refer to Summary of Participants section for
an accurate breakdown of active employees with and without coverage.
As of July 1, 2012 As of July 1, 2013
Active Participants 664 621
Retired Participants 680 583
Averages for Active
Age 47.0 46.1
Service 10.3 12.2
Averages for Inactive
Age 64.6 67.1
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
27 | P a g e
Glossary
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
28 | P a g e
Decrements Exhibit
The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the illustrated
actuarial assumptions show that 44.430 employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55.
Age # Remaining
Employees
# of Terminations
per Year*
# of Retirements
per Year*
Total
Decrements Age
# Remaining
Employees
# of Terminations
per Year*
# of Retirements
per Year*
Total
Decrements
35 100.000 6.276 0.000 6.276 46 55.938 2.085 0.000 2.085
36 93.724 5.677 0.000 5.677 47 53.853 1.866 0.000 1.866
37 88.047 5.136 0.000 5.136 48 51.987 1.656 0.000 1.656
38 82.911 4.648 0.000 4.648 49 50.331 1.452 0.000 1.452
39 78.262 4.209 0.000 4.209 50 48.880 1.253 0.000 1.253
40 74.053 3.814 0.000 3.814 51 47.627 1.060 0.000 1.060
41 70.239 3.456 0.000 3.456 52 46.567 0.877 0.000 0.877
42 66.783 3.131 0.000 3.131 53 45.690 0.707 0.000 0.707
43 63.652 2.835 0.000 2.835 54 44.983 0.553 0.000 0.553
44 60.817 2.564 0.000 2.564 55 44.430 0.000 44.430 44.430
45 58.253 2.316 0.000 2.316
* The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55
Decrements Exhibit
Actives Total Terminations Total Retirements
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
29 | P a g e
Retirement Rates Exhibit
The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the number of
employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average age at retirement
is 62.0.
Age
Active
Employees
BOY
Annual
Retirement
Rates*
# Retirements
per Year
Active
Employees
EOY
55 100.000 5.0% 5.000 95.000
56 95.000 5.0% 4.750 90.250
57 90.250 5.0% 4.513 85.738
58 85.738 5.0% 4.287 81.451
59 81.451 5.0% 4.073 77.378
60 77.378 5.0% 3.869 73.509
61 73.509 5.0% 3.675 69.834
62 69.834 30.0% 20.950 48.884
63 48.884 15.0% 7.333 41.551
64 41.551 15.0% 6.233 35.318
65 35.318 100.0% 35.318 0.000
* The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
55 56 57 58 59 60 61 62 63 64 65
Retirement Rates Exhibit
Actives Total Retirements
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
30 | P a g e
Illustration of GASB Calculations
The purpose of the illustration is to familiarize non-actuaries with the GASB 45 actuarial calculation process.
I. Facts
1. The employer provides subsidized retiree health coverage worth $100,000 to employees retiring at age 55 with 25 years of service. The employer funds
for retiree health coverage on a pay-as-you-go basis.
2. Employee X is age 50 and has worked 20 years with the employer.
3. Retiree health subsidies are paid from the general fund assets which are expected to earn 4.5% per year on a long-term basis.
4. Based on Employee X’s age and sex he has a 98.0% probability of living to age 55 and a 95.0% probability of continuing to work to age 55.
II. Calculation of Present Value of Future Benefits
Present Value of Future Benefits represents the cost to finance benefits payable in the future to current and future retirees and beneficiaries, discounted to
reflect the expected effects of the time value (present value) of money and the probabilities of payment.
Value Description
A. $100,000 Projected benefit at retirement
B. 80.2% Interest discount for five years = (1 / 1.045)5
C. 98.0% Probability of living to retirement age
D. 95.0% Probability of continuing to work to retirement age
E. $74,666 Present value of projected retirement benefit measured at employee’s current age = A x B x C x D
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
31 | P a g e
Illustration of GASB Calculations (continued)
III. Calculation of Actuarial Accrued Liability
Actuarial Accrued Liability represents the portion of the Present Value of Future Benefits which has been accrued recognizing the employee’s past service with
the employer. The Actuarial Accrued Liability is a required disclosure in the Required Supplementary Information section of the employer’s financial statement.
Value Description
A. $74,666 Present value of projected retirement benefit measured at employee’s current age
B. 20 Current years of service with employer
C. 25 Projected years of service with employer at retirement
D. $59,733 Actuarial accrued liability measured at employee’s current age = A x B / C
IV. Calculation of Normal Cost
Normal Cost represents the portion of the Present Value of Future Benefits allocated to the current year.
Value Description
A. $74,666 Present value of projected retirement benefit measured at employee’s current age
B. 25 Projected years of service with employer at retirement
C. $2,987 Normal cost measured at employee’s current age = A / B
V. Calculation of Annual Required Contribution
Annual Required Contribution is the total expense for the current year to be shown in the employer’s income statement.
Value Description
A. $2,987 Normal Cost for the current year
B. $3,509 30-year amortization (level dollar method) of Unfunded Actuarial Accrued Liability using a 4.5% interest rate discount factor
C. $292 Interest adjustment = 4.5% x (A + B)
D. $6,788 Annual Required Contribution = A + B + C
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
32 | P a g e
Definitions
GASB 45 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the GASB
actuarial valuations are noted below.
1. Actuarial Accrued Liability – That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of plan benefits and expenses
which is not provided for by the future Normal Costs.
2. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement and
retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or depreciation;
procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant
items.
3. Actuarial Cost Method – A procedure for determining the Actuarial Present Value of future benefits and expenses and for developing an actuarially
equivalent allocation of such value to time periods, usually in the form of a Normal Cost and an Actuarial Accrued Liability.
4. Actuarial Present Value – The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the
application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is:
a) adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status, etc.);
b) multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the payment is
conditioned; and
c) discounted according to an assumed rate (or rates) of return to reflect the time value of money.
5. Annual OPEB Cost – An accrual-basis measure of the periodic cost of an employer’s participation in a defined benefit OPEB plan.
6. Annual Required Contribution (ARC) – The employer’s periodic required contributions to a defined benefit OPEB plan, calculated in accordance with the
parameters.
7. Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash
contribution made by the employer.
8. Funded Ratio – The actuarial value of assets expressed as a percentage of the actuarial accrued liability.
9. Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of
healthcare services, plan design, and technological developments.
Town of Johnston GASB 45 Valuation
Glossary For Fiscal Year Ending June 30, 2014
33 | P a g e
Definitions (continued) 10. Implicit Subsidy – In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan
members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of age on
claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by the retirees.
11. Net OPEB Obligation – The cumulative difference since the effective date of this Statement between annual OPEB cost and the employer’s contributions to
the plan, including the OPEB liability (asset) at transition, if any, and excluding (a) short-term differences and (b) unpaid contributions that have been
converted to OPEB-related debt.
12. Normal Cost – The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method.
13. Pay-as-you-go – A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the
same amount as benefit payments and expenses becoming due.
14. Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at
which plan participants are expected to receive benefits under the plan.
15. Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries,
terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date
and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to finance
benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment.
Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will
provide sufficient assets to pay total projected benefits when due.
16. Select and Ultimate Rates – Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for
example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent
years. For example, if an actuary applies an assumed investment return of 8% for year 20W0, then 7.5% for 20W1, and 7% for 20W2 and thereafter, then 8%
and 7.5% select rates, and 7% is the ultimate rate.
17. Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan members.